News Column

MARKET COMMENT: Central Banks in Focus As Geopolitics Sidelined

August 17, 2014



LONDON (Alliance News) - After making its biggest weekly gain in 15 last week, the FTSE 100 index is set to open higher Monday morning, as some analysts believe that geopolitical tensions will be contained and investors are instead looking towards central banks.


Futures indicate that the FTSE 100 will open 35 points higher at 6,724.3


Trading overnight in Asia was mixed, with the Nikkei 225 ending flat, while the Hang Seng is trading down 0.3% and the Shanghai Composite up 0.3%.


China reported Monday that Foreign Direct Investment fell by 0.4% having grown by 2.2% in July. Meanwhile, new home prices in most Chinese cities fell in July, data from the National Bureau of Statistics showed. Average new house prices in 64 out of the total 70 cities declined in July from the previous month.


The FTSE 100 saw a sharp fall late on Friday after reports of a Ukrainian attack on an armed Russian convoy filtered through to the markets. However, investors seem to believe that the continuing unrest in eastern Ukraine will be kept from escalating.


"The rebound from the lows in US markets late on Friday once again suggests that investors think that any fall-out is likely to be contained, and this belief is likely to see European markets open higher this [Monday] morning as investors try and maintain a focus on the economic fundamentals and a number of key macro-economic events this week," says Michael Hawson, chief analyst at CMC Markets.


Market participants are looking ahead towards the release of the Bank of England and Federal Reserve minutes, and the Jackson Hole Symposium which will feature a speech from Fed Chair Janet Yellen.


"While itís difficult to pick a standout event from these, as all have great potential to create major waves in the markets, I would say Yellenís key note speech on Thursday just about takes it," says Craig Erlam, market analyst at Alpari.


Erlan highlights that Yellen's predecessor, Ben Bernanke, used his Jackson Hole keynote speech previously to hint at upcoming changes in monetary policy and suggests that Yellen could do the same.


Prior to the open Monday, FTSE 250-listed Amlin reported its interim pretax profit fell to GBP148.5 million from GBP161.4 million previously. However, the company increased its interim dividend by 3.9% to 8.1 pence.


Bovis Homes also has released results, recording an increase in half-year pretax profit to GBP49.4 million from GBP18.6 million. The company increased its interim dividend to 12p, up from 4p and said it is in a strong trading position to increase profit in the rest of the year.


A quiet day in the economic calendar, the main highlight being the results for the US National Association of Home Builders' housing market index for August at 1500 BST.


By Neil Thakrar; neilthakrar@alliancenews.com




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Source: Alliance News


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